Embraer rating upgraded by Fitch on margin gains

On Wednesday, Fitch Ratings lifted Embraer S.A.'s (NYSE:ERJ) Long-Term Foreign and Local Currency Issuer Default Ratings to 'BBB' from 'BBB-', while affirming the company's National Scale Rating at 'AAA(bra)'. In tandem, Fitch upgraded the unsecured notes issued by Embraer Netherlands Finance BV to 'BBB' from 'BBB-'. The Rating Outlook was set to Stable.

The rating action stems from Embraer's heightened product and geographic diversification, clearer medium-term revenue visibility, and margin improvements driven by economies of scale and cost-cutting measures—factors that have collectively reinforced the company's business and financial profiles within the 'BBB' category. Supply chain bottlenecks have gradually dissipated and returned to normal conditions during 2026. Supporting the ratings are Embraer's competitive standing, a robust and varied product lineup, and a $34.5 billion order backlog.

Embraer's business profile now enjoys a more balanced revenue mix compared with the pre-pandemic era, benefiting from defense expansion, services growth, and an upgraded product mix across commercial and executive aviation. Aircraft deliveries climbed 20% year-over-year to 109 units in the first half of 2026, spanning all segments, while the backlog hit a record $34.5 billion during the same period—a 16% increase—offering multi-year revenue visibility. The services and support arm contributes a reliable, higher-margin income stream that partially buffers the cyclical swings in aircraft deliveries. Meanwhile, recent export orders for the KC-390 have diversified the defense customer base beyond the Brazilian Air Force.

Globally, Embraer ranks as the third-largest commercial aircraft maker by deliveries and leads the market for commercial jets with fewer than 150 seats, where its E-Jet family primarily competes with the Airbus A220. The company also commands a premier position in executive aviation, capturing a 30% market share. As delivery volumes have rebounded, Embraer's profitability has strengthened, aided by operating leverage, cost-cutting initiatives implemented since the pandemic, a richer product mix, and expansion of the high-margin services segment.

Fitch forecasts consolidated EBIT and EBITDA margins of roughly 9%-10% and 12%-13%, respectively, for 2026-2028, with EBITDA projected between approximately $1.1 billion and $1.3 billion. Management intends to prioritize maximizing returns from existing platforms while exploring new technologies and applications, and considers a significant new investment decision unlikely before 2027.

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